Northeast Securities: Revenue maintains rapid growth, profit margin steadily increases

Revenue maintains rapid growth.The company's total annual operating revenue increased by 10.6% year-over-year to RMB 11.15 billion. Among this, 361 Degrees' adult revenue grew by 9.1% year-over-year to RMB 8.05 billion, with adult footwear and apparel income increasing by 8% and 10.6%, respectively. On the product side, the company launched popular products such as the professional racing running shoes 'Feiran 5', 'Feiran 5 FUTURE', and the Jokic 'JOKER2' basketball shoes, continuously innovating and upgrading products with technological empowerment; 361 Degrees' children's revenue increased by 10.4% year-over-year to RMB 2.58 billion.

Enhance the operational efficiency of individual stores, and the expansion of superstores is proceeding smoothly.On the offline channel front, as of the end of the reporting period, the number of domestic adult stores for 361 Degrees decreased by a net of 356 to 5,394 compared to the beginning of the year. Children's stores saw a net reduction of 184 to 2,364. Despite the decrease in store numbers, the company achieved steady growth by improving the operational efficiency of individual stores. As of the end of the reporting period, 127 superstores have been opened, with one located in Cambodia to expand overseas markets. Superstores offer a thousand square meters of space, full-scenario product category coverage, and a one-stop self-service shopping model. Through innovative formats and refined operations, they create an all-inclusive sports equipment hub.

E-commerce channels maintain high-speed growth.In 2025, the company's e-commerce channel revenue increased by 25.9% year-on-year to 3.29 billion yuan, accounting for 29.5% of total revenue. The e-commerce channel promptly responded to consumer trends through online-exclusive products and the coordinated development of online and offline channels, maintaining rapid growth. Profitability remained relatively stable. In 2025, the company's gross margin remained largely flat at 41.5%, maintaining a stable gross margin level amidst fluctuating market conditions. On the cost side, advertising and promotional expenses decreased by 2.3 percentage points to 10.5%, while administrative expenses increased by 0.8 percentage points to 7.7%. The net profit margin attributable to shareholders grew by 0.2 percentage points year-on-year to 12%, remaining essentially stable.

Operational performance continues to improve.As of the end of the reporting period, the company's inventory decreased by 2.1% from the beginning of the year to 2.07 billion yuan, with inventory turnover days increasing by 9 days year-on-year to 115 days. Receivables/payables turnover days remained largely unchanged/decreased by 14 days to 147/73 days, respectively, indicating faster operational turnover. The company plans to distribute a dividend of 31.7 Hong Kong cents per share for the full year, maintaining a payout ratio of 45%.

Investment advice: As a leading domestic sports brand, 361 Degrees focuses on targeting the mass market to enhance product quality and value. Its brand influence continues to grow. It is expected that the company will achieve year-on-year growth in net profit attributable to shareholders of 12.1%/9.6%/9.4% for 2026-2028, reaching 1.47/1.61/1.76 billion yuan, corresponding to valuations of 7/7/6 times, maintaining its 'Buy' rating.

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